Introduction to Economics: 2013

1. What empire 500 years ago had no real concept of money? What was the unit of value in this empire?

The Inca Empire had no real concept of money 500 years ago. The unit of value in this empire was labor.

2. What had driven the Conquistador Francisco Pizarro across the Atlantic Ocean in 1532? How many ounces of silver were extracted from South America over 250 years of Spanish rule?

He crossed the Atlantic Ocean because he wanted the money that came from the myth that was El Dorado. There where more than 2 billion ounces of silver extracted from South America over the 250 years of Spanish rule.

3. Why was the gold and silver from the New World unable to halt Spain’s economic decline in the 16th and 17th century? What did the Spaniards “never get” (about money)?

It was unable to halt Spain’s economic decline because there was so much silver that they had gotten that the metal itself had declined in value. The Spaniards never got that was that the money is only worth what other people will give for it.

4. While dollar bills may say “In God We Trust”, what are we trusting the US Treasury Secretary not to repeat? What did the Conquistador’s fail to see about money?

We are trusting the US Treasury Secretary not to repeat Spain’s mistake. The Conquistador’s fail to see about the money that it is about trust even faith about the person giving you the money.

5. What huge possibility was created by the emergence of money as a system of mutual trust? What does “credo” (the root of the word credit) mean in Latin?

The possibility that you could lend someone money and know that they would give it to you later was created by the emergence of money as a system of mutual trust. “Credo” means I believe.

6. Why were financial transactions so difficult in Northern Italy during the Middle Ages? How did Leonardo “Fibonacci” of Pisa help reform this financial system?

They were difficult because there was no trust in Northern Italy. Leonardo “Fibonacci” of Pisa helped reform the financial system by introducing Arabic numbers to be used instead of the Roman numerals.

7. What Italian City state became the great money-lending laboratory? What does Shakespeare’s fictitious resident of this city Shylock use to determine whether he will lend money to someone? (What does he mean when he says a person is a “good man”)?

Venice became the great money-lending laboratory. He determines if he will lend the money to the person by making sure he has the security. He means that its good for the money he is about to lend.

8. Why (in the Italian City States) did anyone who lent money to a merchant for an overseas voyage need to be compensated? What do we call this compensation?

They needed to be compensated because if something where to happen to the money on its voyage they need to make sure they aren’t losing anything. This compensation is called Interest.

9. Why were Jews tolerated in the City of Venice? Why did Christian merchants need to use Jews in order to lend money?

The Jews where tolerated in the City of Venice because they where able to charge interest on their loans. Christian merchants needed to use the Jews in order to lend money because for the Christians what the Jews where doing was a Sin.

10. In what Italian City State does the key financial service of providing credit move out of the ghetto and into the banks? What family caused this?

In Florence the key financial service of proving credit moved out of the ghetto. The family caused this Medici.

11. Prior to the 1390′s, what were the Medici most notable for in Northern Italy? How did Giovanni Medici make the family’s activities “legit”?

They were most notable for the low violence. There was no interest, only deduction from currency to currency.

12. What crucial lesson in finance did the Medici learn? How did the Medici spread their risks and reduce their exposure to defaults on loans?

Bigger and more varied banks allowed for a way for spreading the risks. Focused also on currency trading rather than lending.

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